Published: Tue, October 08, 2019
Markets | By Otis Pena

Samsung could be heading for a 50 percent profit drop

Samsung could be heading for a 50 percent profit drop

Samsung Electronics Co. said on Tuesday its operating earnings plunged 56 per cent in the third quarter from a year earlier, mainly hit by continuing falls in global chip prices, but its performance was better than the market had expected. The main reason behind the drop is the memory chip business of the company which is now suffering from low demand.

Samsung Electronics saw its operating profits rise on-quarter in the third quarter, but its profits were down sharply from the same period a year ago.

Operating income was 7.7-trillion won (US$6.4-billion) in the three months ended September, compared to the 6.97-trillion won analysts had forecast, according to estimates compiled by Bloomberg.

They also expect that revenue has likely fell 5.3% to 62 trillion won from 65.5 trillion won a year ago.

Samsung withholds net profit and sector-by-sector business performance until it releases its final earnings report, which is expected later this month.

Since the end of previous year, Samsung Electronics, the world's highest revenue semiconductor company, has been in trouble. Samsung is also the world's largest smartphone maker.

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Samsung, the world's largest producer of mobile phones and smartphone displays, is benefitting from solid demand for its Note 10 and for Apple Inc.'s iPhone 11 Pro, which uses the company's OLED displays.

According to financial analysts, the inventory levels of DRAM at Samsung and SK hynix will be normalized by the second quarter of next year.

"The Note device is usually released in August or September and sells well until December, so I expect the demand to continue until the fourth quarter", said Tom Kang, research director at Counterpoint Research. Just to be clear, this is considerably more than Samsung made in Q2 this year.

Back then, Samsung actually blamed plummeting chip prices and slower chip demand for such expectations.

U.S. sanctions in opposition to Chinese language giant Huawei helped prop up Samsung over the summer, analysts acknowledged, after the South Korean firm's profits dropped not as a lot as feared.

Shares of Samsung Electronics were trading 1.26 percent higher at 48,350 won on the Seoul bourse as of 10.28 a.m., The earnings guidance was announced before the market opened.

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